Govt on II generation reforms for higher GDP

Kolkata, Jun 24: Chief Economic Advisor to Government of India Ashok Lahiri today emphasised on pushing forward the second generation of economic reforms for ensuring a higher GDP growth in the coming years.

Participating in an interactive session with members of the Bengal National Chamber of Commerce and Industry (BNCCI) here, Dr Lahiri said since the reforms of the 1990s saw some significant changes, only a genuine second generation reform process could take the earlier benefits to a new high and make them more effective particularly in the areas of health and education.

He said after introducing sweeping changes in the policy of delicensing and decontrol of industries besides making external sector reforms, tariff reduction, shifting from protected to open economy and financial liberalisation, the monopoly of state-run institutions had been virtually done away with in all sectors.

Dr Lahiri said the national policy agenda for the future should be determined after analysing the benefits and losses of the previous ones.

He also opined that the second generation reforms were equally important to embark on an urgent programme to revitalise the government and public delivery systems at all levels of administration be that at the Centre, state or the district level.

Elaborating further the Chief Economic Advisor pointed out that introduction of macro-economic reforms to ensure better fiscal health was the topmost priority of the government.

"There is an urgent need to increase the tax-GDP ratio through improved tax administration," Dr Lahiri said and added that though the Indian tax system looked very complicated with having multiplicity of rates, all out efforts were being made at different levels to bring in complete transparency in the whole procedure within the next couple of years.

Dr Lahiri suggested that despite stupendous growth in the past few years, Indian Banking industry as a whole needed further rationalisation for becoming much stronger in the global perspective. He opined that Banks must now focus on business driven credit needs while stressing on simplified procedures, reduced transaction cost, retail lending and infrastructure.

As India had the highest level of state ownership in Banking after China, private Banks, in spite of performing well, had only nine per cent of market share, Dr Lahiri said but regretted that though there was so much state ownership, Indian Banks felt little competitive pressure.

Dr Lahiri stressed on the growth of infrastructure to bring India at par with the best of the developed world.

He said quoting latest government figures in a power point presentation that till last year the country needed investment of over Rs 150,000 crore for construction of roads and highways, over Rs 40,000 crore for construction of port, Rs 16,000 crore for urban development and about Rs 10,000 crores for development of power infrastructure in the country.

He also underlined the need for greater public-private partnership(PPP) not only for rasing necessary fund for the purpose but also for timely completion of the mega infrastructural projects.

Regarding the present rate of inflation (of around 5.5 per cent) in spite of around eight per cent GDP growth, Dr Lahiri felt for any growing economy in the world mainintaining of three to five per cent inflation was not a big deal.

He, however, made it clear that the government was fully aware of the consequences and had been making all possible checks and balances to ensure that the situation never went out of control.

" I can also assure you that we are not heading for a double digit inflation scenario like some of our neighbours, " the Chief Economic advisor said to a query.

Regarding the possibility of further hike in crude oil prices and the government policy towards handling the situation through alternative means, Dr Lahiri refusing to provide any direct answer said a high powered committee had already been appointed to look into the issue and come out with acceptable solution.

About the government policy on further rationalisation of goods and service taxes, Dr Lahiri quoting Union Finance Minister P Chidambaram's views on the issue said a road map to this effect was likely to be prepared by 2010.

When come up it would largely solve the present complexities surrounding the GST issues.

Earlier, welcoming the veteran ecomonist to the Chamber, BNCCI president Nayantara Pal Chowdhury presented a broad view of the country's present economic scenario from the industrial perspective and sought a favourable government policy to mitigate the problems.

More than 100 senior members of the Chamber attended the special meeting.

UNI